Classified in: Business
Subjects: ERN, DIV

Community Heritage Financial, Inc. Reports Record Earnings for the Fourth Quarter of 2020

MIDDLETOWN, Md., Jan. 21, 2021 /PRNewswire/ -- Community Heritage Financial, Inc. ("the Company") (OTC Pink: CMHF), the parent company for Middletown Valley Bank ("MVB") and Millennium Financial Group, Inc. ("Mlend"), announced today that for the quarter ended December 31, 2020, the Company earned net income of $1.567 million or $0.70 per share, an increase of 30.5% or $366 thousand compared to net income of $1.201 million or $0.53 per share for the third quarter of 2020. Net income for the quarter ended December 31, 2020 as compared to the quarter ended December 31, 2019 was up $1.001 million from $566 thousand and earnings per share increased $0.45 per share from $0.25 per share in the fourth quarter of 2019. Year-to-date net income of $4.127 million increased $1.497 million or 56.9% from $2.631 million for 2019. Earnings per share for the year ended 2020 was $1.83 per share compared to $1.17 per share for 2019, an increase of $0.66 per share.

2020 was an unprecedented year and will serve as a benchmark in history for many years to come. The plans and expectations of every person and every business in the world quickly changed and all were forced to forge a new path and adapt to the changes brought on by the pandemic. As the nation works to recover and move forward to strengthen the economy and work its way through the COVID crisis, Community Heritage Financial, Inc., Middletown Valley Bank and Millennium Financial Group, Inc. remain deeply committed to the communities we serve. Mlend and MVB have continued to support the local economy and extended credit to fund over $250 million in residential mortgage loans to local homeowners and over $64 million via the Paycheck Protection Plan, ("PPP") to local small business owners, which supported the retention of 7,554 jobs in the community. During the fourth quarter, the Bank began the process of assisting those small businesses with the loan forgiveness application process and over $14 million in PPP loans had been granted forgiveness by the end of the year. The Bank continues its commitment to the local economy and has begun processing applications for Phase 2 of the PPP program to offer continued support to local jobs and small businesses. While the pandemic remains in the forefront, the health and safety of our customers and employees remains our highest priority as we have taken steps to return to normal operations and provide customers with Absolutely Exceptional Experiences to serve their financial needs.

Quarterly Highlights ? 4Q20 vs 3Q20

Net book value per share increased to $23.52 per share in the fourth quarter, up $0.61 per share, or 2.67% compared to $22.91 in the third quarter of 2020. Tangible book value per share increased by $0.61 or 2.8% to $22.78 per share compared to $22.17 at September 30, 2020.
Cash balances increased on a linked quarter basis by 48.5% or $14.1 million. In the fourth quarter of 2020 the PPP loan payoffs due to SBA forgiveness totaled $14 million. This along with $11.8 million in deposit growth added to the cash increase. The bank deployed a portion of the funds in the form of liquid investment securities and also funded core loan growth for the period. The bank also continued to strengthen off-balance sheet contingency funding sources (FHLB and FRB discount window borrowing capacity), keeping the overall contingency funding position strong at approximately 46% of total funding at the bank level as of December 31, 2020.
Net loans grew on a linked quarter basis by $2.7 million as of December 31, 2020. At the end of the fourth quarter the bank had a total of $50.0 million in PPP loans on the balance sheet, a decrease of $14 million resulting from PPP loan forgiveness. Core loan growth totaled $17.4 million for the fourth quarter. The core growth for the fourth quarter came from $2.3 million in residential mortgages and $15.8 million in commercial real estate and C&I loans.
Overall deposits grew $11.8 million, or 2% for the fourth quarter. The deposit growth for the fourth quarter was affected by the retirement of $10 million in brokered deposits. The brokered deposit decrease was offset by increases in money market accounts totaling $10 million and non-interest-bearing demand deposits totaling $9 million.
Due to a decrease in the cost of funds of 11 basis points quarter over quarter, the bank normalized margin (excludes impact of PPP loans and fees, FRB Cash and Brokered deposits) increased to 3.66% in the fourth quarter from 3.61% in the third quarter of 2020.
Provision expense was $1.46 million for the fourth quarter, up from $845 thousand in the third quarter. While credit quality metrics remained strong, metrics related to unemployment and GDP coupled with a bank applied COVID factor moved the provision expense higher for the fourth quarter. The increased provision moved the "loan loss reserve to total loans" ratio (excluding PPP loans) to 1.47% for December 31, 2020, up from 1.22% as of September 30, 2020.

Quarterly Highlights ? 4Q20 vs 4Q19

Net book value per share of $23.52 represents a $1.92 or 8.9% increase over December 31, 2019 book value of $21.60 per share. Tangible book value per share of $22.78 also increased by $1.92 or 9.2% on a year-over-year basis.
Year-over-year net loan growth was $126.4 million or 29.7%, which includes $50 million in PPP loans. Excluding the PPP loans, core loan growth was $76.4 million or 18% year-over-year.
Deposits grew $153 million or 34.2% on a year over year basis compared to December 31, 2019. Excluding brokered deposits of $8 million (as of 12/31/20), core deposits increased $144.5 million or 32.3% year-over-year. Most of the growth was in demand deposits ($71 million) and low interest cost money market and savings deposits ($57.5 million).
As of December 2020, the bank had reduced overall cost of funds to 0.39%, down from 0.97% in December of 2019.
Year-to date loan loss provision expense through December 31, 2020 totaled $3.25 million (excludes $254 thousand for off-balance sheet and check card loss provision), an increase of $2.49 million compared to $763 thousand through December 31, 2019. Loan growth and economic metrics due to the pandemic (unemployment, GDP and COVID factor) account for the increased provision expense.
On a total year basis, non-interest income for 2020 grew by $4.439 million compared to non-interest income for 2019. Mortgage activity and secondary sales income (increase of $3.57 million) along with security sale gains of $750 thousand account for most of the increase. The company also booked a $465 thousand gain on the derivative related to interest rate lock commitments on residential mortgage loans for 2020.
Non-interest expense year to date December 31, 2020 increased $2.8 million compared to December 31, 2019. The increase is directly related to the increased mortgage volume (processing, investor fees, etc.) noted above, while the remaining increased expense is related to additional technology, staffing and processing costs associated with rapid asset growth (33.2% year-over-year).

Dividend

A dividend of $0.04 per share was declared by the Board of Directors on January 19, 2021 for shareholders of record as of February 2, 2021 and payable on February 9, 2021.

This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can generally be identified by the use of forward- looking terminology such as "believes," "expects," "intends," "may," "will," "should," "anticipates" or similar terminology. Such statements, specifically regarding the Company's intentions regarding transparency, growth and market expansion, are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, changes in interest rates, stock market liquidity, deposit flows, loan demand and real estate values, as well as changes in economic, competitive, governmental, regulatory, technological and other factors which may affect the Company specifically, its existing and target market areas or the banking industry in general. The realization or occurrence of these risks or uncertainties could cause actual results to differ materially from those addressed in the forward-looking statements.

Community Heritage Financial, Inc.
Robert E. (BJ) Goetz, Jr.
President & Chief Executive Officer
301-371-3055
www.communityheritageinc.com

Community Heritage Financial, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)

		December 31,	September 30,		June 30,	March 31,	December 31,
		2020	2020		2020	2020	2019
		(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)	(Audited)

Assets
Cash and due from banks		$29,185,895	$15,043,681		$49,706,388	$96,263,005	$25,065,743
Fed funds sold		-	-		-	-	-
Total cash and cash equivalents		29,185,895	15,043,681		49,706,388	96,263,005	25,065,743

Interest-bearing deposits with banks		-	-		-	-	-
Securities available-for-sale, at fair value		71,058,845	67,440,907		69,518,278	51,357,044	42,640,765
Equity securities, at cost		462,100	462,100		462,100	1,737,100	392,200

Loans		558,966,588	554,851,127		524,512,193	450,357,944	429,334,750
Less allowance for loan loss		7,480,190	6,023,558		5,179,211	4,552,647	4,235,316
	Loans, net	551,486,398	548,827,569		519,332,982	445,805,298	425,099,435

Loans held for sale		13,900,894	21,670,409		13,525,399	6,765,210	3,775,199
Premises and equipment, net		6,399,918	6,458,931		6,612,225	6,719,863	6,815,474
Right-of-use assets		2,666,896	2,784,840		2,899,764	2,996,370	3,109,423
Accrued interest receivable		2,199,489	2,191,831		2,002,813	1,265,627	1,232,624
Deferred tax assets		2,080,834	1,796,287		978,166	1,028,379	979,581
Bank-owned life insurance		5,279,741	5,214,030		5,026,968	5,000,147	4,966,843
Goodwill		1,656,507	1,656,507		1,656,507	1,656,507	1,656,507
Intangible assets		9,028	11,111		13,195	15,278	17,361
Other real estate owned		-	-		-	-	-
Other Assets		2,226,396	1,960,467		1,740,498	1,280,286	1,215,938
	Total Assets	$688,612,940	$675,518,670		$673,475,281	$621,890,113	$516,967,093

Liabilities and Stockholders' Equity

Liabilities
Deposits:
Non-interest-bearing demand		$197,415,650	$187,971,604		$181,154,551	$134,342,517	$126,449,656
Interest-bearing		402,262,420	399,955,185		413,742,711	385,258,946	320,256,855
	Total Deposits	599,678,070	587,926,789		594,897,262	519,601,463	446,706,511

Federal home loan bank advances		-	-	-	-	30,000,000	-
Subordinated debt, net		14,663,636	14,641,212		14,618,788	14,596,364	14,573,940
Other borrowings		8,305,449	10,577,345		5,784,495	616,371	289,039
Lease liabilities		2,714,979	2,823,382		2,934,461	3,027,221	3,136,351
Accrued interest payable		215,490	445,258		234,619	504,060	279,832
Other liabilities		10,074,820	7,532,465		4,506,634	4,295,541	3,346,518
	Total Liabilities	635,652,444	623,946,450		622,976,259	572,641,020	468,332,191

Stockholders' Equity
Common stock		22,513	22,513		22,513	22,513	22,513
Surplus		28,523,004	28,523,004		28,523,004	28,523,004	28,523,004
Retained earnings		23,633,375	22,156,244		21,045,316	20,286,492	19,866,169
Accumulated other comprehensive income (loss)		781,603	870,459		908,189	417,083	223,217
	Total Stockholders' Equity	52,960,495	51,572,219		50,499,022	49,249,092	48,634,902

	Total Liabilities and Stockholders' Equity	$688,612,940	$675,518,670		$673,475,281	$621,890,113	$561,967,093

Community Heritage Financial, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)

		Three Months Ended			Twelve Months Ended
		December 31,	September 30,	December 31,	December 31,	December 31,
		2020	2020	2019	2020	2019

Interest Income
	Loans, including fees	$6,311,740	$5,811,942	$5,189,074	$22,935,022	$19,681,478
	Securities	307,082	304,756	195,913	1,073,590	909,568
	Fed funds sold and other	13,044	29,402	109,577	152,726	496,974
	Total interest income	6,631,865	6,146,099	5,494,564	24,161,338	21,088,020

Interest Expense
	Deposits	619,250	728,081	1,051,829	3,353,129	4,199,796
	Borrowed funds	-	-	1	48,869	1
	Subordinated debt	238,053	238,049	201,445	947,409	201,445
	Other Interest Expense	63,216	66,877	7,746	170,293	85,024
	Total interest expense	920,519	1,033,008	1,261,021	4,519,700	4,486,265

Net interest income		5,711,346	5,113,092	4,233,543	19,641,638	16,601,754
Provision for loan losses		1,456,879	844,521	227,442	3,252,897	763,490
Net interest income after provision for loan losses		4,254,467	4,268,571	4,006,101	16,388,741	15,838,264

Non-interest income
	Service charges on deposits	199,634	164,660	153,250	648,125	590,534
	Earnings bank owned life insurance	54,648	46,771	31,360	144,962	109,176
	Gain/(loss) sale of fixed assets	-	500	-	500	(5,471)
	Gain/(loss) sale of securities	575,869	164,464	-	749,590	(636)
	Mortgage loan income activity	2,210,046	1,973,960	792,237	6,139,762	2,566,355
	Other non-interest income	170,711	155,515	154,471	581,817	566,002
	Total non-interest income	3,210,907	2,505,870	1,131,318	8,264,755	3,825,959

Non-interest expense
	Salaries and employee benefits	2,928,023	3,133,762	2,524,214	11,147,427	9,460,012
	Occupancy and equipment	681,446	694,331	685,066	2,738,468	2,498,741
	Legal and professional fees	217,174	200,451	139,289	746,435	683,696
	Advertising	453,077	96,098	199,255	771,512	467,185
	Data processing	570,630	504,575	423,509	1,984,715	1,399,269
	FDIC premiums	112,999	106,675	-	272,154	179,323
	Other intangible amortization	2,083	2,083	2,083	8,333	7,639
	Loss other real estate owned	-	-	-	-	(12,017)
	Merger and acquisition	-	-	-	-	77,596
	Other	227,229	413,695	401,796	1,277,271	1,343,887
	Total non-interest expense	5,192,661	5,151,670	4,375,213	18,946,317	16,105,332
Income before taxes		2,272,713	1,622,771	762,206	5,707,180	3,558,892
Income tax expense		705,528	421,791	196,120	1,579,761	928,117
Net Income		$1,567,185	$1,200,980	$566,086	$4,127,418	$2,630,774

Basic earnings per share		$0.70	$0.53	$0.25	$1.83	$1.17

Community Heritage Financial, Inc. and Subsidiaries
Selected Financial Data

Income Statement Review

	For the Three Months Ended			For the Twelve Months Ended
	December 31,	September 30,	December 31,	December 31,	December 31,
	2020	2020	2019	2020	2019
	(Unaudited)	(Unaudited)	(Audited)	(Unaudited)	(Audited)

Interest Income	$6,631,865	$6,146,099	$5,494,564	$24,161,338	$21,088,020
Interest Expense	920,519	1,033,008	1,261,021	4,519,700	4,486,265
Net interest income	5,711,346	5,113,092	4,233,543	19,641,638	16,601,754
Provision expense	1,456,879	844,521	227,442	3,252,897	763,490
Net interest income after provision	$4,254,467	$4,268,571	$4,006,101	$16,388,741	$15,838,264

Non-interest income	$3,210,907	$2,505,370	$1,131,318	$8,264,755	$3,825,959
Non-interest expense	5,192,661	5,151,170	4,375,213	18,946,317	16,105,332
Merger expenses	-	-	-	-	77,596

Yield on interest-earning assets	4.04%	3.85%	4.49%	3.97%	4.67%
Cost of interest-bearing liabilities	0.86%	0.97%	1.54%	1.11%	1.46%
Efficiency ratio	58.20%	67.61%	81.55%	67.89%	78.80%

Balance Sheet Review

	December 31,	September 30,		December 31,
	2020	2020		2019
	(Unaudited)	(Unaudited)		(Audited)
(dollars in thousands)
Total assets	$688,612,939	$675,518,670		$516,967,093
Loans, net of reserve	551,486,398	548,827,569		425,099,435
Goodwill & intangibles	1,665,534	1,667,618		1,673,868
Deposits	599,678,070	587,926,789		446,706,511
Shareholder's equity	52,960,495	51,572,219		48,634,902

Asset Quality Review
Non-accrual loans	$1,005,634	$1,246,457		$1,155,358
Trouble debt restructured loans still accruing	932,770	681,455		700,856
Loans 90 days past due still accruing	-	294,000		-
Foreclosure properties	-	-		-
Total non-performing assets	$1,938,404	$2,221,912		$1,856,214

Non-performing assets to total assets	0.28%	0.33%		0.36%
Non-performing assets to total loans	0.38%	0.40%		0.43%

Summary of Operating Results

	For the Three Months Ended		For the Twelve Months Ended
	December 31,	December 31,	December 31,	December 31,
	2020	2019	2020	2019
	(Unaudited)	(Unaudited)	(Unaudited)	(Audited)

Pre-allowance for Loan Loss provision, pre-tax net income	$3,729,592	$989,648	$8,960,077	$4,322,382
Allowance for loan loss provision, pre-tax	1,456,879	227,442	3,252,897	763,490
Tax expense	705,528	196,120	1,579,761	928,117
Net Income	$1,567,185	$566,086	$4,127,418	$2,630,774

(dollars in thousands)
Charge-offs	$13,173	$13,429	$62,856	$176,557
(Recoveries)	($6,185)	($792)	($34,851)	($21,731)
Net charge-offs	$6,988	$11,637	$28,004	$154,827

Per Common Share Data

Common shares outstanding	2,251,320	2,251,320	2,251,320	2,251,320
Weighted average shares outstanding	2,251,320	2,251,320	2,251,320	2,250,064

Basic Earnings per share	$0.70	$0.25	$1.83	$1.17
Dividend declared	$0.04	$0.03	$0.16	$0.12

Book value per share	$23.52	$21.60	$23.52	$21.60
Tangible book value per share	$22.78	$20.86	$22.78	$20.86

Selected Financial Ratios (unaudited)

Return on average assets	0.92%	0.44%	0.64%	0.55%
Return on average equity	11.65%	4.67%	8.06%	5.55%
Allowance for loan losses to total loans	1.34%	0.99%	1.34%	0.99%
Allowance for loan loss to total loans (excluding PPP loans)	1.47%	0.99%	1.47%	0.99%
Non-performing assets to total loans	0.38%	0.40%	0.38%	0.43%
Non-performing assets to total loans (excluding PPP)	0.38%	0.43%	0.38%	0.43%
Net Charge-offs to total loans	0.00%	0.00%	0.01%	0.04%
Tier-1 leverage ratio	N/A	11.76%	N/A	11.76%
Community bank leverage ratio (bank only)**	9.14%	N/A	9.14%	N/A
Average equity to average assets	7.87%	9.52%	8.00%	9.88%
Net interest margin (bank only, normalized)*	3.66%	3.61%	3.60%	3.69%
Loans to deposits - (EOP)	93.21%	96.11%	93.21%	96.11%


*Normalized margin excludes impact of PPP loans and related on balance sheet liquidity through Brokered deposits, FHLB Borrowing and FRB cash
**As of March 31, 2020 the bank adopted the community bank leverage ratio (CBLR) for capital reporting

SOURCE Community Heritage Financial, Inc.

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News published on 21 january 2021 at 14:02 and distributed by:

Community Heritage Financial, Inc. Reports Record Earnings for the Fourth Quarter of 2020

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